RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/W/263 
2 September 2005 
 (05-3834) 
Council for Trade in Services Original:   English 
  
 
COMMUNICATION FROM JAPAN 
 
Transitional Review Mechanism in connection with Paragraph 18 of 
 
the Protocol on the Accession of the People's Republic of China  
 
 
 The following communication, dated 30 August 2005, from the delegation of Japan is being 
circulated to the Members of th e Council for Trade in Services. 
 
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Questions and comments of Japan on the implementation by China  
of its commitments on Trade in Services  
  1. Japan appreciates that China’ s liberalization efforts are on-going taking into account the 
WTO commitments made at the time of Chin a’s accession.  However, through the domestic 
consultation with industries, Japan now realized th at it should shed more light on the operational and 
regulatory aspects, including licensing requirement s and procedures to see whether the commercial 
interests that are legitimately expected have been r ealized in real terms. Jap an also wishes China to 
ensure that, in accordance with paragraph 5 (a) of Article VI of the GATS, domestic regulations are: 
(a) based on objective and transparent criteria, 
(b) not more burdensome than necessary to en sure the quality of the service, and 
(c) in case of licensing procedures, not in themselves a restriction on the supply of the 
service. 
2. With respect to Japan's questions and comment s on insurance and insurance-related services 
and banking services, please refer to the document th at has been sent to the Committee on Trade in 
Financial Services. 
I. LEGAL SERVICES 
3. China explained in the last TRM that there was no quantitative restriction on foreign legal 
service suppliers. Then, there is no longer clear legiti mate reason to maintain Paragraph 3 of Article 7 
of “the Management Regulations on Forei gn Law Firms in China (Regulation No.338)”. Therefore, 
Japan requests China to remove this clause.  
II. ARCHITECTURAL AND ENGINEERING SERVICES 
4. According to "the Regulations on Administra tion of Foreign-Invested Construction and 
Engineering Design Enterprises" and "the Regula tions on Management of Foreign-funded Urban S/C/W/263 
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 Planning Service Enterprises" (Decree No.114 and 116 of the Ministry of Construction), foreign 
construction service enterprises and architectural a nd engineering design service enterprises need to 
satisfy qualification requirements, such as minimu m capital, number of engineers and foreign and 
domestic engineer-ratio. Some of these requirement s raise doubts concerning their consistency with 
Article VI:5 of the GATS and China's WTO commitments , in particular, in relation to Article XVII of 
the GATS. In this light, Japan would like China to explain how the requirements of foreign 
professionals ratios, “one-fourth for a wholly foreign-owned enterprise and one-eighth for a 
Sino-foreign joint venture or a Sino-foreign coop eratively managed enterprise” in Article 15 of 
Decree No. 114 and “25%“  in Article 6 of Dec ree No. 116, are consistent with China’s WTO 
commitments.  Japan also considers that these requirement s are more burdensome than necessary and 
requests China to abolish the requirements. 
III. COMPUTER AND RELATED SERVICES 
5. Japan has been informed that China bans cons ultancy service related to the installation of 
computer hardware through call center by foreig n suppliers. Japan believes that this service is 
classified under “Computer and related services”, mo re specifically, “Consultancy services related to 
the installation of computer hardware (CPC 841) ” where China has no reservation on Mode 1, 2 and 
3. Japan requests China to duly comply with this commitment.  
IV. COMMUNICATION SERVICES:   TELECOMMUNICATION 
6. "The Telecommunications Act”, a basic la w on operating telecommunications business, 
remains to be constituted. Due to the lack of the law, telecommunications operators are facing 
difficulties initiating and expanding their busin esses in Chinese market despite China's WTO 
commitments. Japan urges China to explain the time schedule of constituting the act and the 
outline of the act.  
7. With regard to the restriction on resale of telecommunications services, China stated in the 
last TRM that this restriction also applied to domestic operators, and give n the actual development 
level of China’s telecommunications market, it w as still premature to remove this restriction. 
However, Japan firmly believes that this restric tion does not comply with China’s WTO commitments 
because there is no reservation for the resale. Even if this restriction is applied to both the domestic 
and foreign operators in a non-discriminatory ma nner, this ensures only the consistency with 
“National Treatment,” not “Market Access”.  Therefore, Japan requests that China comply with 
its commitments and abolish this restriction.  
8. In China, it is acknowledged that some foreign operators were instructed orally to satisfy 
additional requirements that are not stipulated in th e relevant laws and regulations when they applied 
for licenses. Japan requests China to abstain from such  discretionary administration and make 
licensing criteria publicly available.  
9. Japan understands that the term s and conditions of interconn ections regarding the leased 
circuit, frame relay and IP-VPN, etc. are not ma de publicly available because “the Regulation on the 
Interconnections between Public Telecommunicat ion Networks” (Decree 9 of the Ministry of 
Information Industry) does not stipulate them.  Japan requests that China amend the regulations in 
order to ensure the transparency of interconnection arrangements.  
10. With regard to the international gateway fo r providing international telecommunications 
services, China stated in the last TRM that Chin a made no commitment in this regard.  However, 
according to the GATS, with respect to sectors where commitments are undertaken, each Member has 
the right to maintain or adopt measures inconsis tent with “Marke t Access” or “Na tional Treatment” 
only when such measures are inscribed as reserv ation in the Specific Commitment. International  S/C/W/263 
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 gateway is an inevitable part of telecommunications  network to provide tel ecommunications services.  
Therefore, unless a specific reservation is inscribed  in the Specific Commitment, the international 
gateway is not excluded with respect to sectors where commitments are undertaken.  Although there 
is a footnote mentioning “all international tel ecommunications services are required to go through 
gateways established with the approval of China’ s telecommunications authority” in China’s WTO 
commitments, this footnote by no means exclud es the international gateway from commitments.  
Therefore, Japan firmly believes that China made  commitment regarding the international gateway. If 
China still insists that no commitment was made in this regard, Japan would like China to 
explain the detailed reason.  
11. In addition, Japan would like to point out that the Administrative Measures on International 
Gateways (Decree 22 of the Ministry of Informati on Industry), which stipulates that the construction, 
operation and maintenance of the international gateway stations are permitted only to the Chinese 
state-owned enterprises, is inconsistent with “N ational Treatment.” According to the GATS, each 
Member shall specify conditions and qualifications on “National Treatment”.  Although there is a footnote mentioning “all international telecommun ications services are required to go through 
gateways established with the approval of China’ s telecommunications authority” in China’s WTO 
commitments, this footnote by no means reserv es this measure inconsistent with “National 
Treatment”, which excludes foreign service s uppliers from the construction, operation and 
maintenance of the international gateway. Thus, Japan requests China to abolish this measure and 
urges China to comply with its WTO commitments.  
V. CONSTRUCTION AND RELATED ENGINEERING SERVICES 
12. After the establishment of "the Regulations  on Administration of Foreign-Invested 
Construction Enterprises" (Decree No.113 of the Minist ry of Construction) and the abolition of "the 
Tentative Measures on Administration of Foreign Enterprise Qualifications for Contracting for 
Construction Projects" (Decree No.32 of the Minist ry of Construction), Japan considers that higher 
barriers for foreign construction enterprises to provide services in China have been introduced. Japan 
requests China to maintain the system under De cree No.32, which permits foreign construction 
enterprises without local presence to undertake construction projects on a project-by-project basis.  
13. Wholly foreign-owned enterprises are allowed to undertake only four types of construction 
projects as set out in China's WTO commitments.  In addition to this limitation, the foreign construction enterprises need to be qualified by th e Chinese authority, and are subject to requirements 
such as the minimum capital and the number of engineers according to “the Regulations on 
Administration of Foreign-Invested Construction En terprises” that came into force in December 2002. 
In particular, plant construction requires a lot of qualification requirements such as those for roadway 
civil works and for construction houses. They should be comprehensively included in the qualification 
for the plant contractor. Japan believes these requirements co nstitute substantial barriers to 
foreign construction enterprises and hen ce requests that China ease or abolish these 
qualification requirements.   Japan is still concerned whether th ese requirements are compatible with 
the GATS Articles VI:5 and XVII. With respect to Circular No. 159 of the Ministry of 
Construction, Japan would like China to confirm that it regards foreign experience of a foreign 
contractor as valid in fulfilling requirements no t only for new application for a qualification 
certificate, but also for renewal or reviewing of the certificate.  
VI. DISTRIBUTION SERVICES 
14. Japan requests China to ensure "the Meas ures for the Administration of Foreign 
Investment in Commercial Fields", which was promulgated on 16 April 2004 and came into force on 1 June 2004, to be administer ed consistently with WTO agreements.   S/C/W/263 
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 15. With regard to "the Measures for the Admini stration of Foreign Investment in Commercial 
Fields", Japan believes licensing requirements in th e measures are unclear and requests China 
to make the requireme nts publicly available.  
VII. TOURISM AND TRAVEL RELATED SERVICES 
16. The Japanese tourism industry has difficulti es in establishing branches in China since 
requirements and time-frame for the application pro cess are unclear. In the last TRM, China stated 
that the laws and regulations on branches of  foreign enterprises were under formulation. Japan would 
like to know the progress of the formulat ion of such laws and regulations.  
17. In China’s WTO commitments, foreign-owned (inc luding joint venture) travel agencies and 
tour operators are not allowed to deal with Chinese traveling abroad. However, it seems that not only 
Chinese but also other nationals traveling abroad are not allowed to be dealt with by foreign operators 
at the operational level. Japan would like China to clarify whether foreign operators can handle 
foreigners’ outbound travel.  
VIII.  TRANSPORT SERVICES (MARITIME TR ANSPORT SERVICES AND AUXILIARY 
SERVICES) 
18. On the occasion of the accession to the WTO, Chin a enacted “the Regulations of the People’s 
Republic of China on International Maritime Trans portation” which entered into force on 1 January, 
2002. According to the Regulation, any foreign sh ipping company that intends to engage in 
international liner services to and from China shall be registered with the Ministry of 
Communications. The Article 17 of the Regulation provides that: 
- To be engaged in international liner  services, an application shall be 
submitted to the competent communications department of the State Council; 
- The competent communications department of the State Council shall 
complete examination and verification within 30 days from the date of 
receipt of the application for international liner services.   If the 
application documents are authentic and complete, registration shall be 
granted and the applicant shall be notified of the result; 
- If the application documents are unauthe ntic and incomplete, no registration 
shall be granted and the applicant sha ll be notified in writing and given the 
reasons therefore. 
19. On 27 April 2005 a Japan-Sino joint venture in corporated under Japanese law applied to the 
Ministry of Communications for registration, accordi ng to the provision of the Regulation in order to 
start international liner services between Shimonos eki and Shanghai. Even after 30 days passed 
thereafter, the Ministry did not notify the applican t of a result or any reason why registration is not 
granted. As a result, the Japanese company was not able to start international liner services between 
Shimonoseki and Shanghai as originally scheduled . In China’s WTO commitments, no reservation 
was made to the market access of mode 1 regard ing the international maritime transport services 
including passenger transportation. Japan understands that market access for international maritime 
transport services of a foreign shipping company is s ubstantially hampered by such action of Chinese 
government by not notifying the applicant of the r esult and reason within the 30 day deadline clearly 
stipulated in the Regulation. Japan requests Chinese government to  notify an applicant of the 
result and reason immediately in writing according to the Regulation.   S/C/W/263 
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 20. In China’s WTO commitments, when a forei gn company establishes a maritime transport 
company in China, foreign investment shall not ex ceed 49% of the total registered capital of a joint 
venture. In the last TRM, China stated that, based on the principle of reciprocity, if there is a bilateral 
agreement with China, “the wholly-foreign-owned sh ipping company is permitte d.” In relation to this, 
"The interim provisions on examin ation and approval of wholly-fore ign-owned shipping companies" 
provides a special arrangement for the establishmen t of the wholly-foreign-owned shipping company 
under the special conditions including "more than  15 years experience as a marine transport 
enterprise", "representative office in China more th an three years", "the existence of a scheduled 
entering of a port where the wholly-foreign-owned sh ipping company is planned to be located" and 
“the increase in paid-in capital of the wholly-fo reign-owned shipping company each time it opens a 
branch.”  The third condition, "the existence of a sche duled entering of a port where the wholly-
foreign-owned shipping company is planned to be  located", constitutes substantial barriers to 
supply services for customers who reside in the i nner part of China. Japan would like to know 
China’s views on this point, in particular, in light of Article VI:5 of the GATS.  
 
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